P/E is just 8.3 as of March 6th

BY MARTIN HUTCHINSON, Global Investing Strategist, Money MorningHaving spent three years there as a child, I have happy memories of Singapore.

In those days, most of the locals lived in "atap" palm-frond-roofed huts and bathed by standpipes.

Today's Singapore is completely unrecognizable to me.

It is a modern country that is now among the world's richest. There is barely a palm-frond roof to be found anywhere.

Singapore is also ranked first on the World Bank's Doing Business list (the U.S. is fourth), second on the Heritage Foundation's Index of Economic Freedom (the U.S. is 10th ) and fifth on Transparency International's Corruption Perceptions Index (the United States is 24th).

So why is the Singapore stock market trading on an 8.3 times P/E ratio, according to the Financial Times?

The Upside of the Singapore Stock MarketAfter all, its economy is in fine shape, and is growing faster than any of the major Western economies.

In fact, with its GDP per capita estimated at $50,700, Singapore is now richer than the United States.

It's all proof that as the world's leading trade entrepot, Singapore is aggressively moving up the global value chain as its citizens become richer and better educated.

And unlike the U.S., Singapore's recovery from the 2008-09 recession was rapid, with 14% growth in 2010.

Since then, it has entered a mini-recession, with GDP declining at a 2.5% annual rate in the fourth quarter of 2011. Still, overall growth in 2011 was a solid 4.8%, and the country is expected to grow by another 3.1% in 2012, according to the analysts at The Economist.

Inflation is a moderate problem, running around 5%, although it is expected to decline.

Yet the most impressive statistic about Singaporeis its current account surplus of 18.4% of GDP; the budget is also in modest surplus, as it is most years.

With a GDP of only $266 billion in 2011, Singapore is a relatively small economy. But its exalted position in wealth, economic freedom and clean government and business make it a country that is a highly attractive place to invest in.

That's why its current modest P/E ratio is so surprising.

The recession has affected bank earnings (Singapore is a center of private banking, with excellent secrecy laws) but its industrial companies appear to be doing well, so patient investors should find themselves very well rewarded indeed, as the market enjoys an upward re-rating.